What does big pharma Johnson & Johnson (JNJ -0.69%) have in common with biotech Moderna (MRNA 0.89%)? Well, both companies have been working to conquer a common respiratory virus. They've both approached the finish line with vaccine candidates for respiratory syncytial virus (RSV).
Last week, however, Johnson & Johnson said it would discontinue its adult RSV program. And that means one less potential competitor for Moderna, as the biotech aims to file for regulatory approval in the first half of this year. Could the J&J news eventually translate into billions of dollars for Moderna? Let's find out.
J&J's portfolio review
J&J isn't bowing out due to a problem with its candidate's performance. Instead, this is happening as part of the company's routine portfolio review -- to keep the focus on "medicines with the greatest potential benefit to patients."
RSV is definitely an area of need. Today, there is no approved vaccine to prevent the illness in older adults. And this population is particularly at risk of severe infection: Between 60,000 and 160,000 older Americans require hospitalization every year due to RSV, according to the Centers for Disease Control and Prevention.
But this situation may quickly change. GSK (GSK -0.92%) and Pfizer (PFE -0.19%) have already applied for approval of their investigational RSV vaccines. A U.S. Food and Drug Administration (FDA) advisory committee voted unanimously for the efficacy of the GSK candidate, and 7 to 4 in favor of Pfizer's efficacy. The committee also supported the safety of each candidate.
The FDA is set to make a decision on both potential products in May. It's impossible to predict what that decision will be with complete accuracy. However, considering the data and the committee votes, there's reason to be optimistic about the GSK and Pfizer candidates.
So, let's imagine the FDA gives both the nod. Then let's say Moderna submits its candidate according to plan -- and wins approval later this year, or at the start of 2024. Could Moderna gain some of the extra market share that might have gone to J&J?
In this scenario, GSK and Pfizer clearly will have the first-to-market advantage.
An efficacy advantage
It's difficult to compare data across the three companies' clinical trials; each trial is designed differently, and the participants' health profiles aren't identical. Still, Moderna may have a slight efficacy advantage. Moderna's vaccine showed overall efficacy of 83.7%. GSK's reached 82.6% and Pfizer's came in weaker at 66.7% overall.
These numbers may not greatly affect vaccine sales right away. If anything, Moderna may have to work a little harder than its peers when it launches, if it enters the market several months later.
That said, Moderna's strong efficacy numbers could make its product a top choice for the highest-risk individuals, so the biotech could have a shot at some of the market share that would have gone to J&J. Moderna's product also could appeal to healthcare providers, since the company has built a solid reputation in the world of respiratory-virus vaccines -- thanks to its coronavirus vaccine.
And Moderna is investing in building out its infrastructure. So it should be in great shape to launch its vaccine when the time comes.
Finally, in a three-company market, Moderna clearly could carve out plenty of market share -- which should translate into blockbuster revenue. Moderna predicts the older-adult RSV market represents an opportunity of more than $10 billion.
What does this mean for investors?
J&J's exit from the RSV market leaves Moderna even more room to grow in a billion-dollar market. So this is good news for the company -- and for investors. This may not lift the stock right away; Moderna's revenue is set to fall this year as we move toward a post-pandemic world. Coronavirus vaccine demand is on the decline.
But this is a year of transition. Next year -- if Moderna wins a regulatory nod for its RSV candidate -- could be the start of a new era of growth. And investors who hold onto Moderna for the long term may reap the rewards.
